new mexico's economy: recent developments and...

New Mexico's Economy: Recent Developments and Outlook

2015 Economic Outlook 10th Annual Conference

Jeffrey Mitchell Director, BBER

[email protected] http://bber.unm.edu/

Bureau of Business & Economic Research UNM

UNM Bureau of Business & Economic Research 2

Overview: NM Economic conditions and outlook

o New Mexico’s recovery from the Great Recession has been very slow – employment remains nearly 4% below pre-recession levels (2008).

o Labor force has been hit hard by the stagnation. o But the most recent (preliminary) data is much more

promising. o Dramatic drop in oil prices is a mixed blessing for New

Mexico. o Preliminary outlook: sustained, unspectacular growth –

employment reaching pre-recession levels by end-2017.


New Mexico’s ‘Post-Recession’ Performance


New Mexico & US employment growth: history

Sources: New Mexico – FOR-UNM; US – IHS Global Insight


Employment growth: NM and Neighboring States (2009=100)

Source: BLS Quarterly Census of Employment and Wages


Employment growth: Albuquerque and Neighboring Metropolitan Areas (2009=100)

Source: BLS Current Economic Survey


Job Growth in Professional & Technical Services: NM and Neighboring States (2009=100)



New Mexico employment: rate of growth and state ranking by industrial sector



New Mexico private employment: rate of growth and state ranking by establishment size

Source: BLS Quarterly Census of Employment and Wages Note: Data include only first quarter of each year.


Implications of Economic Stagnation for Population

Births Deaths Int'l Domestic

1990-1999 14,307 25,493 11,186 8,061 3,827 4,234 22,3682000-2009 12,959 26,577 13,618 7,056 4,734 2,322 20,015

2010-2013 12,040 29,664 17,624 -3,250 1,946 -5,196 8,7902012-2013 10,674 27,146 16,472 -8,809 1,717 -10,526 1,865

Total Population

Change

Natural Increase Net Migration

Source: Census Bureau, 2000 and 2010 Decennial; 2012 and 2013 Population estimates.

Components of population change


How does the decline in oil prices impact New Mexico’s economy?

1. Employment impact: lower investment in production, creating fewer jobs in the oil industry and through purchasing by companies and spending by workers.

2. Fiscal impact: reduces state and local government revenues, forcing budget cuts.

3. Consumer impact: lower gasoline prices mean more household spending on local goods & services.

West Texas Intermediate: $46/barrel, $106/barrel in July.


1. Employment impacts of lower production

Lubbock, TX

Las Cruces

Santa Fe

Midland-Odessa, TX

ABQ MSA has 45% of all jobs in NM.

Employment impact of 100 jobs in oil & related industries in Permian Basin (Eddy & Lea Counties)

o Impact of lower prices on producers is somewhat delayed.

o Employment impact is important locally but less important for the statewide economy.


2. Fiscal impact: Oil & State General Fund

o 20% (~$1.2 billion) – directly funded by oil & gas: taxes on production on private land, leases and royalties on state and federal lands.

o 10% (~$600 million) – indirectly funded by income from Permanent Funds.

o Permanent fund = $20 billion, up from $12 billion in 2009; 3rd largest in US (after TX and AK; larger than Canada’s).

o Oil & gas also funds a share of capital bonds.

o Expected loss of $145 million in ‘new money’ for FY 2016 due to decline in oil prices; 2.5% of expected budget.


Contribution of Oil & Gas to State General Fund

Permanent funds (10%)

Total: $5,590 million (2013)

Source: New Mexico Tax Research Institute, January 2014.

Current O&G (21%)


3. Consumer impact: more money to spend locally

o Decline in gasoline prices from $3.50 to $2/gallon will save New Mexico households ~ $1 billion.

o About $1,200 per household, or 2.5% of median household income.

o If households spend all of the gasoline savings and the savings were sustained, estimated impact:

6,500 jobs $250 million in wages, salaries & benefits $750 million in total impact Partially offset losses to General Fund


Recent Economic Data


New Mexico & US employment growth: forecast

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

2009 2010 2011 2012 2013 2014Nov2014

Gain of 14,700 jobs in November (vs. year earlier)

Source: Bureau of Labor Statistics, Current Economic Survey

Employment growth (seasonally adjusted, year-over-year)


%/yr Rank %/yr Rank

Private 0.7% 44 1.4% 35 Natural resources and mining 8.0% 4 3.8% 20 Construction -1.2% 46 0.4% 33 Manufacturing 0.1% 40 -7.8% 49 Transportation, and utilities 0.8% 38 2.0% 26 Retail 0.1% 41 2.6% 20 Financial activities -0.1% 41 6.6% 2 Professional and business services -0.4% 50 -1.4% 49 Education and health services 1.9% 23 3.7% 7 Leisure and hospitality 1.9% 41 0.5% 40 Other services -1.0% 44 3.4% 10

Public -1.3% 41 0.4% 33 Total 0.4% 49 1.0% 24

2014 July-Nov2010-2014Q2

Recent employment gains: rate of growth and state ranking by industrial sector

Source: BLS Current Economic Survey (including preliminary data)


New Mexico Economic Outlook (Preliminary)


New Mexico economic outlook

o Forecast little changed since 2014 Q3 and Q4 – offsetting impacts of oil price decline.

o Steady job growth sustained through 2017, adding about 10,000 per year, reaching pre-recession levels by end-2017.

o Leading sectors: health care, transportation. o Non-metro fades (oil), Albuquerque rises (slowly),

Las Cruces remains fastest growing region. o Upside risk: housing markets and construction employment

– New Mexico forecast well below IHS national outlook. o Downside risk: global recession holds back US.


Forecast Assumptions

IHS Global Insight outlook for United States: o Oil prices: 2015 average $64, 2016 average $75/barrel. o Interest rates rise slowly (0.25% per quarter), beginning

June 2015 and peaking in 2017 at 3.75%. o Weak growth of trading partners (2%/year), $ strong.

Assumptions for New Mexico: o Spending increases by federal, state & local governments

remain constrained. o Medicaid expansion gets traction.


-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

2011 2012 2013 2014 2015 2016 2017 2018 2019

New Mexico United States

New Mexico & US employment growth forecast (preliminary)

Sources: New Mexico: FORUNM; US – IHS Global Insight


New Mexico & US Income growth forecast (preliminary)

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

2011 2012 2013 2014 2015 2016 2017 2018 2019

New Mexico United States

Sources: New Mexico: FORUNM; US – IHS Global Insight


New Mexico Housing Permits: Single & Multi-Family Units, 2005-2019

0.000

2.000

4.000

6.000

8.000

10.000

12.000

14.000

16.000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

NM Housing Permits (Multi Family) NM Housing Permits (Single Family)

Source: FOR-UNM


Western Blue Chip: forecasted employment and income growth, 2015

2.0%

1.1%

2.5% 2.5% 2.6% 2.5% 2.7%

4.4%

3.5%

4.8% 4.9%

3.1%

5.4% 5.0%

0%

1%

2%

3%

4%

5%

6%

US New Mexico Arizona Colorado Nevada Texas Utah

Employment Personal Income


Western Blue Chip: forecasted employment and income growth, 2016

1.8% 1.3%

2.7% 2.6% 2.7% 2.5%

2.8%

5.0% 4.4%

5.3% 4.9%

3.6%

6.0%

4.8%

0%

1%

2%

3%

4%

5%

6%

7%

US New Mexico Arizona Colorado Nevada Texas Utah

Employment Personal Income


Employment gain/loss by region, 2010-2019

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Albuquerque Las Cruces Santa Fe Non-Metro

New Mexico's Economy: Recent Developments and Outlook

2015 Economic Outlook 10th Annual Conference

Jeffrey Mitchell Director, BBER

[email protected] http://bber.unm.edu/

Bureau of Business & Economic Research UNM

new mexico's economy: recent developments and...

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